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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






2. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






3. The output where ATC is minimized and economic profit is zero






4. The marginal utility from consumption of more and more of that item falls over time






5. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






6. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






7. Ed > 1 - meaning consumers are price sensitive






8. AFC = TFC/Q






9. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






10. MUx / Px = MUy/Py or MUx/MUy = Px/Py






11. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






12. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






13. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






14. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






15. The most desirable alternative given up as the result of a decision






16. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






17. 0 < Ei < 1






18. Entry of new firms shifts the cost curves for all firms downward






19. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






20. The rational decision maker chooses an action if MB = MC






21. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






22. ATC = TC/Q = AFC + AVC






23. Ed = 0 - no response to price change






24. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






25. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






26. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






27. Ed = 1






28. A firm that has market power in the factor market (a wage-setter)






29. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






30. The mechanism for combining production resources - with existing technology - into finished goods and services






31. Exists at the point where the quantity supplied equals the quantity demanded






32. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






33. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






34. Costs that change with the level of output. If output is zero - so are TVCs.






35. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






36. Ed = 8 - infinite change in demand to price change






37. When firms focus their resources on production of goods for which they have comparative advantage






38. The imbalance between limited productive resources and unlimited human wants






39. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






40. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






41. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






42. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






43. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






44. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






45. Exists if a producer can produce more of a good than all other producers






46. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






47. The lost net benefit to society caused by a movement away from the competitive market equilibrium






48. Occurs when LRAC is constant over a variety of plant sizes






49. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






50. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF